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Walt Disney has reportedly signaled that it is gearing up for a potentially prolonged fight with YouTube TV over distribution of its television networks. Disney's networks disappeared from YouTube TV -- the fourth-largest pay-TV provider in the US with about 10 million subscribers -- on October 30.
YouTube TV blackout for Disney marks the latest carriage rights dispute between the Google-parent Alphabet company and a major media company. NBCUniversal also had a similar dispute with YouTube TV earlier this year.According to a report by Reuters, the tense discussions underscore YouTube TV's rapid growth as well as Google's vast financial resources, which is said to give the platform greater leverage in negotiations with media companies.
"The deal that we have proposed is equal to or better than what other large distributors have already agreed to," Disney CEO Bob Iger said, referring to the talks with YouTube TV. He further added, "And while we've been working tirelessly to close this deal and restore our channel to the platform, it's also imperative that we make sure that we agree with a deal that reflects the value that we deliver, which both YouTube, by the way, and Alphabet have told us is greater than the value of any other provider.
"Disney CEO Iger's current contract expires at the end of 2026; Disney is expected to name his successor early next year.
Disney CFO on YouTube Blackout in earnings call
On a post-earnings call, Chief Financial Officer Hugh Johnston told analysts that Disney has "built a hedge" into its forecasts assuming that the negotiations with Google on YouTube could drag on. Disney's quarterly revenue was comparable to a year ago at $22.5 billion but shy of the $22.75 billion analyst forecast.Profit at the traditional television unit declined 21% to $391 million, and income from ESPN slipped too, offsetting other divisions including streaming, where earnings rose 39% to $352 million. Disney has invested more in streaming and its parks to offset the industry-wide decline of traditional broadcast and cable TV. Disney said it added 12.5 million subscribers to Disney+ and Hulu during the quarter, reaching a total of 196 million.A new distribution deal with cable and broadband provider Charter Communications helped draw new streaming customers, Johnston told Reuters.
What is worrying Disney investors
What is reportedly worrying investors about Disney's outlook for its already declining TV business is that the company also missed quarterly revenue expectations as the cable weakness overshadowed strong growth in the Disney's streaming and parks businesses central to its growth. "Disney is reducing its reliance upon cable companies to distribute its channels. But cutting out video distributors will take time," said Emarketer senior analyst Ross Benes. "YouTube TV is one of the leading cable TV providers, so its absence is a big hole for sports fans."Morgan Stanley analysts estimate that a 14-day blackout on YouTube TV would cost Disney about $60 million in revenue.
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